Issue - meetings

To consider an update on the Medium Term Financial Plan 2016/17 to 2018/19.

(Report attached)

The Committee considered a report which set out the proposed budget for 2016/17 and the impact of the provisional local government financial settlement on the Medium Term Financial Plan to 2018/19.  Members also noted the Summary of Discussions arising from the extraordinary meeting of the Overview and Scrutiny Committee on 1st February 2016 in relation to the Medium Term Financial Plan.  The Chair advised that he had extended an invitation to Councillor Potter, Chair of O&S, to attend Executive Committee, however she was unable to do so owing to a prior appointment and Officers and Members who had attended O&S were also present at the Executive.

Officers gave a detailed presentation on the report and the report appendices, which included:

·       the Council’s response to the settlement;

·       savings and additional income;

·       unavoidable pressures;

·       new revenue bids; and

·       capital bids.

Following announcements made in the government’s Autumn Statement in November the Council had been expecting the Revenue Support Grant (RSG) to reduce to zero by the end of the current Parliament in 2019/20, and Officers had been considering plans to address this shortfall in revenue to ensure that a sustainable approach to the delivery of services was in place.  Over the last few years the Council had taken every opportunity to deliver savings to meet the reduction in government funding, including the sharing of services with other councils and the transformation of services.  Savings of £1.5m per annum had been realised from these initiatives, whilst increasing balances to £1.9m.  Officers were continuing to review services and to improve the offer to the Borough’s residents whilst delivering savings.

However, under the provisional settlement received in late December funding allocations had changed from 2016/17 and the RSG would disappear for Redditch earlier than anticipated.  RSG reductions would be front-loaded and in real terms represented a 121% loss in grant by 2019/20.  By 2018/19 the Council would receive only £40k RSG, with payments to the government (negative grant) of £330k having to be made by the Council from 2019/20. 

Officers explained the government’s new funding methodology and the implications of this, including the Baseline Funding Level, Business Rates Baseline, Settlement Funding Assessment, Council Tax Requirement, Core Funding and Cumulative Reduction.  Proposed changes to the New Homes Bonus, which were also subject to consultation, were outlined.  Based on current projections this could see a further loss of funding of over £2m by 2020/21.  The significant impact of the cuts generally on Redditch in comparison with other authorities nationally was noted.  The new methodology for determining authorities’ RSG allocations took into account individual authorities’ council tax raising ability and the type of services provided, and as such appeared to favour social services authorities.   

Officers provided clarification on the report appendices and highlighted an amendment to recommendation 2.1.6 of the report, with the 2016/17 transfer from balances as detailed in the 3-year financial summary at paragraph 3.30 of the report being £579k and not £598k as set out in the recommendation. 

The Council’s response to the  ...  view the full minutes text for item 89

To consider a report concerning the Medium Term Financial Plan 2016/17 – 2018/19.

(Verbal report)

Officers provided Members with an update on the impact of the provisional local government finance settlement 2016/17 which had been published on 17th December.  On the back of the initial settlement details Heads of Service were currently working through the budget pressures prior to the budget and Council Tax setting reports in February.

In relation to the Revenue Support Grant (RSG) which the authority received from central government to support services across the Borough, Officers had expected this to reduce to zero by 2019/20, as announced previously, and were considering plans to address this.  However, as a result of the latest settlement Redditch would lose all of its RSG in 2018/19, and would move into a position of having to contribute funds totalling £330k back to the Government in 2019/20. 

Officers illustrated the impact of the settlement on the Council and the loss of the RSG over the next 4 years compared to previous forecasts together with the impact for Redditch compared to other councils which was significantly higher for Redditch than many other councils nationally.  There would be a £3m shortfall in funding compared to the original budget assumptions, and a £5m reduction had the RSG have increased by 1% inflation since 2015/16. 

Officers explained that the assumptions on the Council improving its spending power were based on an estimate of the Council Tax base growth exceeding current expectations and therefore increasing available funding to support services.  The somewhat optimistic assumptions included Council Tax base increases of approximately 1% initially (which was double the current estimations), rising to 3% increase in future years.  Officers felt that this was highly optimistic based on current growth across the Borough.  The impact of the growth assumptions on Council Tax resulted in a further £350k shortfall to Government expectations for the Borough finances.

There were also proposals to change the New Homes Bonus Scheme.  The Council currently received a 6-year payment for any property built in the Borough and the Government was looking to change this to 4 years.  Additionally, there were a number of proposals to reduce New Homes Bonus (NHB) where there was no local plan, where homes had been allowed on appeal or where the growth would have occurred anyway, meaning there was no longer any certainty with this.  The potential reduction of income to the Council over the 4-year period was just over £2m.  The Government had given assurances that they would look at a 4-year settlement offer, which would sit around an ‘efficiency statement’.  There was some certainly around the use of capital receipts, although various uncertainties still remained overall.  Earmarked balances were also affected.

Officers advised that the first consultation response on the proposed settlement was due by Friday 15th January, which Members would be sent a copy of, with the NHB consultation deadline being 15th March.  A joint response from the six county District Leaders expressing their combined concerns was an option, with it being unclear at this stage as to whether 3-year budgets could be  ...  view the full minutes text for item 80